Table of Contents Foreword from the President, FHRAI... 1 HVS Hospitality Services... 2 ECOTEL... 4 Synopsis & Key Highlights of the Survey... 5 Country Trends... 7 In The Focus... 8 City Trends... 12 Indian Hospitality In Sync with Nature... 19 1. Indian Hotel Industry by Category... 22 2. Indian Hotel Industry Inventory and Chain Affiliation... 31 3. Indian Hotel Industry Seven Major Cities... 39 4. Indian Hotel Industry Twelve Other Cities... 50 Hotel Analysis Worksheet... 61
Foreword The Federation of Hotel & Restaurant Associations of India is pleased to present the thirteenth annual edition of the Indian Hotel Industry Survey, in cooperation with HVS Hospitality Services. This survey includes indepth information about the performance of hotels across various cities and positioning and provides several benchmarks for comparing hotel performance in India. We would like to thank the participating hotels for all the detailed information they have provided, therefore helping to improve the quality of this research. The Indian Hotel Industry Survey analyses the performance of the Indian hospitality industry across parameters such as facilities, manpower, operational performance and marketing trends. The information is based on data received from FHRAI hotel members and the authenticity of this data helps us in providing a clear picture of the operating statistics of India's hospitality sector. Data collected from our member hotels, our extensive historic database and the credibility of our research have helped make this report a preferred tool for hotel professionals, consultants, investors, bankers, researchers, government officials in the tourism department, media persons and all those interested in studying the Indian hotel industry. The current edition includes an analysis of seven major cities for which we have received detailed information and twelve other cities where information was available with us for some hotels, though not in sufficient numbers for all the star categories. We earnestly request all our members to be more forthcoming with sharing the required information as this helps us all. Therefore, while we have basic data for 1,200 members (an increase from the 1,168 responses received last year), the financial data is not available for all of them. We encourage feedback on the presentation and content of this report to enable us to improve it each year. We are thankful to HVS Hospitality Services for their continued support for this project as well as ECOTEL for having sponsored the current edition. Ratan Marothia President, FHRAI Page 1
About HVS HVS Hospitality Services is the world's leading consulting and services organization focused on the hotel, restaurant, shared ownership, gaming and leisure industries. Founded in 1980 in the United States by Stephen Rushmore, the company has 30 offices across the globe and more than 18,000 assignments to its credit. Hotel owners, operators, lenders, banks, and management companies all turn to HVS as the respected authority on hospitality. HVS New Delhi was established in 1997 and has risen to be the only dedicated hospitality-consulting firm in this region. It currently offers its consulting and valuation services to clients with interests in the South Asian Region covering India, Sri Lanka, Bangladesh, Pakistan and Nepal. The different verticals based on the services offered by the New Delhi Office are mentioned below: CONSULTING AND VALUATION The team comprises experienced and qualified hotel professionals undertaking feasibility studies, development strategies, valuations, market area analyses, market entry strategies, investment services, and operator search & management contract negotiations. HVS's database of hotel information, combined with broad insight and extensive experience, enables us to produce well-documented studies that contain fully supported value conclusions. Each report is customized to meet client requirements based on mutually agreed upon parameters. The HVS approach on hotel and real estate appraisal is widely used by hotel management companies, financial institutions, equity investors and developers of hotels in making investment decisions in the South Asian hospitality industry. EXECUTIVE SEARCH Executive Search, another vertical to the base of services offered, entered the Indian market in 2001 and manages diverse portfolios across varied sectors. HVS Executive Search has offices in New Delhi and Mumbai and is among South Asia's first retained Executive Search practices catering to the services sector. While hospitality continues to be an important area of focus, this division has carried out senior level searches in the real estate, financial services, retail and healthcare sectors. MARKETING AND COMMUNICATIONS Marketing Communications Services provides a specialized platform for its clients, creating executable marketing and communication road maps for improved business performance. Our services include Pre- Opening, Opening and Tactical Marketing Campaigns, Conceptualization, Strategic Advertising, Development and Implementation of Brand Architecture and Strategies, Creation and Management of CRM Strategies, F&B Marketing and Corporate Communications. Page 2
7TH HOTEL INVESTMENT CONFERENCE - SOUTH ASIA HICSA 2011 th 6-7 APRIL 2011, MUMBAI, INDIA www.hicsaconference.com A confluence of hotel industry stakeholders, visions and ideas, industry news and networking, HICSA has successfully created an interactive platform in the South Asian region. For enquiries regarding the seventh annual investment conference HICSA 2011, please visit www.hicsaconference.com or send an email to HICSA@HVS.com th 15-16 DECEMBER 2010 The Hotel Operations Summit India would exclusively focus on hotel operations; HOSI aims to empower today's hospitality professional through enabling discussions on current hotel operational issues, sharing of industry best practices and providing access to international operational quality standards to its delegates. For more information please visit www.hosiconference.com or send an email to HOSI@HVS.com Page 3
The ECOTEL Certification, managed by HVS, is our commitment to protect the environment. Our endeavour is to utilize our expertise in hospitality operations and make our partner hotels more environment friendly. Through the practical application of our knowledge and experience, we aim to enable operators in reducing their impact on the environment while functioning more efficiently and cost effectively. The ECOTEL certification is based on five areas of environmentalism including Energy, Solid Waste and Water management through Environment Commitment and E m p l o y e e E d u c a t i o n a n d Community Involvement. These five areas, represented as globes, together encompass the entire gamut of people/staff-driven operations and practices along with infrastructure that will make the hotel a sustainable operation. Our newly relaunched website will soon feature a reservation engine for guests to conveniently locate and book rooms across our hotels. Certification For further details and information please visit our website at www.ecotelhotels.com or contact us at: Shamsher Singh Mann smann@hvs.com +919910736246 Harinakkshi Nair hnair@hvs.com +919820203036 Page 4
Synopsis and Key Highlights Introduction The Indian hospitality industry has emerged as one of the key industries driving the growth of the services sector and, thereby, the Indian economy. The FHRAI Indian Hotel Survey 2010 aims to provide the most comprehensive guide to all India performance trends for this industry. Results of the Survey will empower industry stakeholders such as owners, investors, operators, business analysts and researchers with information on the operational aspects of the industry. It will help operators benchmark their performance and identify investment opportunities. Data Collection The data for the FHRAI Indian Hotel Survey 2010 Report has been contributed by the member hotels of FHRAI. The FHRAI sends out a questionnaire to each of its members (currently numbering 2,351 member hotels) which is then analysed and presented in this report. The data presented in the current edition is culled from 1,200 responses. Methodology The data received from hotels participating in the survey is sorted and filtered into a comprehensible structure. The data is then processed and analysed to extract important information pertaining to the performance of the Indian hospitality sector across crucial parameters. These parameters, such as guest segmentation, hotel finances, marketing, sources of reservations and seasonality, among others, are then presented under the following categories: : Five, Four, Three, Two and One- hotels along with Other hotels (which are not classified under any star ratings). Inventory: Number of rooms in hotels are categorised as Less than 50 Rooms, 50-150 Rooms, and More Than 150 Rooms. Affiliation: The two types of affiliations used to categorise hotels are Affiliated to Chain and Independent. Primary Markets: The seven major cities described in this report are Bengaluru, Chennai, Goa, Kolkata, Mumbai, New Delhi-NCR, and Pune. Secondary Markets: Twelve secondary cities described in this report are Ahmedabad, Coimbatore, Hyderabad, Indore, Jaipur, Kochi, Madurai, Mysore, Shimla, Thiruvananthapuram, Udaipur and Vadodara. Page 5
Qualifying Conditions While it is our endeavour to represent all the cities in India, we are limited by the data received from the participating hotels. In order to make the study relevant, we present data for only those categories for which we have a minimum of four participating hotels. Hotels across different categories showing similar characteristics have been combined under the same category. To facilitate better evaluation of data across comparable groups, the financial statements are presented up to Net Income, before any deduction of depreciation and interest, which are hotel/owner specific. Limiting Condition In some cases, there are large fluctuations in the data and this noise in the data may be attributed to the changing participation in the survey and may not be an accurate representation of market performance. Presentation of Financial Data Percentage of Revenue: is an assessment of costs as a percentage of revenue. Departmental expenses are portions of individual revenue heads while Operating and Fixed Expenses are deducted from Gross Hotel Revenue following the international accounting guidelines. Amount per Available Room (PAR): is the financial performance of a single room and is based on the total inventory. Amount per Occupied Room (POR): is the performance of a single occupied room. All amounts presented in this report have been rounded to the nearest whole number and are in Indian rupees (`) for the fiscal year 2009-10 (April-March). In the financial statements, rupee amounts are provided as amounts per available room (PAR) and per occupied room (POR) in order to eliminate differences in the size of hotels surveyed. Page 6
Key Trends This section is divided in three parts: Country Trends, In the Focus, and City Trends. In the first subsection, we provide an overview of the broad trends which have been observed in the country in the past year. The second subsection highlights the trends related to revenue and income generation, and presents the survey findings related to Key Operating Statistics. This is followed by the City Trends, which reflect HVS' perception for each city, as well as our expectations with regard to its performance in the current year (2010-11). Country Trends Overall Performance: In the first half of the year 2009-10, the Indian hotel industry felt the effects of the global financial crisis, coupled with the Mumbai terror attack, which took place in the previous year. With most organisations curbing expenses related to travel and entertainment, the hotel industry suffered from a decrease in commercial travel and decline in revenues from meetings and conferences as well as corporate events and get-togethers. However, towards the end of the year, strong domestic demand, coupled with increased global confidence in the business environment in India helped in improving occupancies and average rates. Overall, the average occupancy across India declined by approximately -3%, with some cities witnessing declines of up to -15%, reflecting decreased travel by corporations, re-negotiation of corporate contracts, and decreased leisure travel. However, the average rates witnessed an increase of approximately 8%. The increase in departmental and fixed expenses as a percentage of revenue, coupled with a decrease in top-lines lead to a decline in net income percentages of approximately 11% in 2009-10 over 2008-09. The PAR increase in property operations and maintenance costs, along with the POR increase in food and beverage expenses is responsible for the reduction in bottom lines. Increasing use of Technology: The hotel industry is making use of new technology in almost every function and department to increase efficiency and standardise operations. From using the hotel website as a forum for marketing and communicating with customers to designing customised revenue management solutions for hotel chains, technology is being used to provide better service and connect with the customer. Enhanced database management systems and customer relationship management systems, whether used in-house or outsourced, help to monitor guest preferences in an era when it is becoming imperative to differentiate a hotel product from the others. Customised systems and software are being designed for support departments, such as Human Resources. Hotel chains are using sophisticated software to monitor staff performance, manage turnover, and to facilitate career planning of hotel employees. Energy saving and monitoring systems are another example of introducing efficiency in operations and reducing costs with the help of technology. Manpower Management: The hotel industry in India is at a turning point, where it is witnessing an influx of international and domestic branded hotels, along with a renewed interest by investors. One of the biggest challenges of this service industry, where the customer pays for much more than only the tangible product offerings, is managing manpower. The challenges faced in managing the manpower include increasing payrolls and compensation, high levels of attrition with the addition of new hospitality products in the market space and attrition to other service industries such as retail and travel firms, and frequent need for employee training in order to maintain service standards. Although manpower remains an issue due to the limited number of quality hotel-education institutions in the country, the problems related to training and attrition can be addressed by designing effective careerplanning programs for the employees within the property or in the same hotel chain and using programs such as cross training and mentoring, which empower the employees. Looking at nontraditional sources of hiring such as physically challenged employees, non-profit organizations, and local rural communities can also help in retention and reduction of payroll expenditure. Additionally, industry reports such as the 2010 HCE India Salary and Benefits Report, published by HVS, can be used
to benchmark compensation of employees at different hierarchical levels. Domestic Traveller: In the previous year's report, we had highlighted the growing importance of the domestic traveller, who with increased spending propensity continues to support the hotel industry in India. The increase in both commercial and leisure travel by the domestic traveller enabled growth in some cities despite the effects of the global economic downturn. In 2009, the country witnessed an inflow of approximately 650 million domestic tourist arrivals, compared to only about 5 million foreign tourist arrivals. Hotels across the country are noticing the rise of the educated and ever-expanding Indian middle class; although this segment is price sensitive and demands value for money, they are expecting better service standards and quality as they continue to travel to foreign destinations and compare the domestic products to the international ones. The domestic traveller cannot be ignored today by any domestic or international hotel and hotel chain, and we expect them to drive demand for hotels in the near future. Outsourcing: With the rising operating and manpower costs in hotels, several hotel managers and operators have opted for outsourcing services such as laundry, housekeeping, and food and beverage outlets. The reasons for choosing outsourcing range from saving costs (especially for small properties where the inventory does not permit efficiencies of scale) to decreased financial risk when the services are operated on a profit-sharing basis. Sometimes, bringing in a specialist on the property such as a known food and beverage outlet brand can also become the unique selling point of the hotel and help in marketing the property. The most commonly outsourced services include laundry services and food and beverage outlets; however, with the entrance of facilities management companies such as Aramark in the hotel industry, even housekeeping services are being outsourced. Although outsourcing can be a convenient option to decrease costs and increase efficiencies in operation, it is necessary to gauge the risk of minimised control over operations, which might affect customer satisfaction. Hotel Rooms: As the industry matures and witnesses increased competition from international hotel brands, the hotel room has evolved from being only a place to sleep to trying to offer a space that the guest can make their own and remember for future stays. Some trends that we have noticed in the evolution of hotel rooms are highlighted below: o o o Use of simplified, modular design for rooms and spaces with a focus on straight lines, pastel colours, and personalised, homely spaces. Introduction of women-only floors and increased security measures for women travellers such as video-phones. Increased focus on in-room technology which includes having more plug-points around the bed and the work/study area, availability of international adapters and different plug-points, and including in-room amenities such as i-pod docking stations, light controls near the bed, and individual temperature controls in rooms and bathrooms. In the Focus Revenues and Incomes We have always maintained that the hospitality industry is cyclical in nature, experiencing a certain amount of lag time to respond to economic fluctuations. In the past five years, the hotel industry has witnessed numerous ups and downs. While industry performance started to improve in 2005-06 and reached its peak in 2007-08, the years 2008-09 and 2009-10 witnessed turbulent times, given the international economic conditions and local disturbances. The occupancies continued to decline in the year 2009-10 over 2008-09; however, the average rates saw a marginal increase. The overall revenues and Net Incomes decreased over the
last year across all hotel classifications. We believe that the last quarter of 2009-10 already started showing signs of recovery, with improving occupancies and average rates; we expect the industry to witness recovery in the coming two years, with continued improvement in hotel industry performance across the country. Exhibit 1: Revenue and Net Income 2,000 45.0% Revenu and Net Income (`, 000 s) 1,800 1,600 1,400 1,200 1,000 800 600 400 200 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% Net Income (%) 0 2005-06 2006-07 2007-08 2008-09 2009-10 0.0% Revenue Net Income Net Income % Exhibit 2: Hotel Occupancy and Rate 5,500 70.0% Rate ( ` '000s) 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 68.0% 66.0% 64.0% 62.0% 60.0% 58.0% Occupancy ( % ) 1,000 2005-06 2006-07 2007-08 2008-09 2009-10 56.0% Rate Occupancy Exhibit 1 above illustrates the trends in revenue and net income over the past five years. In 2009-10, while the revenues declined by 5% over the past year, the net income for hotels declined by -15%. This may be attributed to the high fixed costs incurred by hotels and also an increase in other costs such as Energy and Property Operations and Maintenance. Exhibit 2 confirms the earlier-mentioned observation of a decline in hotel occupancies and an increase in average rates, signalling the beginning of the recovery phase, which is expected to continue in the coming one to two years. Page 9
Distribution of Revenues Exhibit 3: Distribution of Revenue (2005-06 to 2009-10) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 8% 6% 5% 5% 6% 35% 34% 33% 34% 38% 57% 60% 61% 60% 57% 2005-06 2006-07 2007-08 2008-09 2009-10 Rooms F&B and Banquets Other Exhibit 3 illustrates that in 2009-10, the percentage of revenue from Food & Beverage and Banquets increased significantly as a percentage of revenue. This could be attributed to the overall decline in room revenues in 2009-10, and also to the increase in meetings and social events being held in hotels, due to increased consumer spending by domestic customers. In our previous reports, we have highlighted the opportunities for F&B and Banquets in India, and these revenues continue to support top lines since they are not largely dependent on international conditions. We also note an increase across all departmental expenses, when calculated as a percentage of the respective departmental revenues in 2009-10. This could be attributed to rising inflationary pressures on the cost of food products, other consumables, and even other items required for hotel operations. Page 10
TABLE 1: Trends in Key Operating Statistics 2005-06 2006-07 2007-08 2008-09 2009-10 2005-06 Number of responses: 484 488 453 474 526 484 488 453 474 526 484 488 453 474 526 2006-07 2007-08 2008-09 2009-10 2005-06 2006-07 2007-08 2008-09 2009-10 Total Rooms Per Hotel: 66 64 68 69 72 66 64 68 69 72 66 64 68 69 72 Occupied Rooms Per Hotel: 15,549 15,459 16,732 15,143 15,174 15,549 15,459 16,732 15,143 15,174 15,549 15,459 16,732 15,143 15,174 Occupancy Per Hotel: 64.1% 66.9% 69.4% 63.1% 59.9% 64.1% 66.9% 69.4% 63.1% 59.9% 64.1% 66.9% 69.4% 63.1% 59.9% Rate Per Hotel ( ): 3,227 3,742 4,605 4,487 4,149 3,227 3,742 4,605 4,487 4,149 3,227 3,742 4,605 4,487 4,149 ` Percentage of Revenue Amount Per Available Room ` ) Amount Per Occupied Room( ` ) REVENUE Rooms 57.3% 59.7% 61.2% 60.5% 56.7% 764,321 903,228 1,140,130 985,310 876,919 3,227 3,742 4,605 4,487 4,149 Food & Beverage 25.7 25.6 25.4 25.9 28.7 343,191 387,728 472,834 417,248 443,367 1,449 1,606 1,910 1,900 2,098 Banquets & Conferences 9.4 8.5 8.1 8.6 8.9 125,309 128,696 150,827 144,054 137,353 529 533 609 656 650 Telephone & Other 2.1 0.8 0.6 0.6 0.6 27,652 12,192 10,919 9,154 8,618 117 51 44 42 41 Minor Operated* 3.0 2.9 2.6 2.2 2.8 40,532 43,077 48,325 36,360 43,594 171 178 195 166 206 Rental & Other Income 2.4 2.6 2.1 2.3 2.5 32,557 39,092 39,921 36,743 37,885 137 162 161 167 179 Total 100.0 100.0 100.0 100.0 100.0 1,333,560 1,514,010 1,862,950 1,628,870 1,547,737 5,630 6,272 7,525 7,418 7,322 DEPARTMENTAL EXPENSES Rooms 15.7 14.7 16.1 14.8 17.1 119,959 132,661 183,116 146,192 149,683 506 550 740 666 708 Food & Beverage 56.7 57.7 51.7 55.3 56.1 265,815 297,860 322,623 310,165 325,793 1,122 1,234 1,303 1,412 1,541 Telephone & Other 34.3 90.7 109.1 79.7 90.2 9,497 11,058 11,907 7,291 7,776 40 46 48 33 37 Minor Operated* 57.0 56.6 60.5 70.3 65.5 23,085 24,390 29,233 25,554 28,555 97 101 118 116 135 Rental & Other Income 8.1 15.6 15.0 9.7 8.7 2,627 6,113 6,002 3,553 3,285 11 25 24 16 16 Total 31.6 31.2 29.7 30.3 33.3 420,984 472,082 552,881 492,755 515,092 1,777 1,956 2,233 2,244 2,437 DEPARTMENTAL INCOME 68.4 68.8 70.3 69.8 66.7 912,580 1,041,930 1,310,070 1,136,110 1,032,645 3,853 4,316 5,292 5,174 4,885 OPERATING EXPENSES Administrative & General 7.3 7.0 7.4 8.7 9.1 97,729 105,894 138,316 141,121 140,057 413 439 559 643 663 Management Fee 2.6 2.1 2.5 2.7 2.6 33,980 31,288 45,572 44,133 40,243 143 130 184 201 190 Marketing 2.9 3.0 2.9 2.7 2.6 39,050 45,620 54,727 44,439 39,920 165 189 221 202 189 Franchise Fees 0.5 0.4 0.4 0.5 0.5 7,218 6,588 8,074 8,496 7,795 30 27 33 39 37 Property Operations & Maintenance 5.1 5.4 4.9 5.4 5.7 68,511 81,778 90,665 87,780 88,550 289 339 366 400 419 Energy 8.7 7.8 7.3 8.5 8.9 116,577 118,763 135,077 138,749 138,097 492 492 546 632 653 Total 27.2 25.8 25.4 28.5 29.4 363,065 389,932 472,431 464,717 454,661 1,533 1,615 1,908 2,116 2,151 HOUSE PROFIT 41.2 43.1 45.0 41.2 37.4 549,514 651,998 837,642 671,396 577,985 2,320 2,701 3,384 3,058 2,734 FIXED EXPENSES Property Taxes 1.2 0.7 0.6 0.6 0.8 15,711 10,520 11,217 10,031 11,819 66 44 45 46 56 Insurance 0.5 0.6 0.3 0.3 0.4 6,371 8,256 5,933 4,522 5,355 27 34 24 21 25 Other Fixed Expenses 1.9 1.4 0.9 1.1 1.4 25,507 21,831 17,027 18,365 21,935 108 90 69 84 104 Rent 1.1 1.4 1.2 1.3 1.0 14,685 20,670 22,464 21,784 15,392 62 86 91 99 73 Total 4.7 4.1 3.0 3.4 3.5 62,273 61,277 56,640 54,702 54,500 263 254 229 249 258 NET INCOME** 36.5% 39.0% 41.9% 37.9% 33.8% 487,241 590,721 781,001 616,694 523,484 2,057 2,447 3,155 2,808 2,477 * Minor operated departments include: laundry, gift shop, business centre, news stand, sports, health club, garage, parking and so forth ** Net Income is before depreciation, interest payments and taxes Page 11
City Trends The hotel industry suffered in 2008-09 and 2009-10, with erosion of occupancy and rates in most major markets, as a result of decreased travel by corporations, slowdown in the global economic growth, and the terror attack in Mumbai. However, the last quarter of 2009-10 begun to show signs of recovery, with positive business sentiment and increased investor confidence in the country. With renewed interest in India as an emerging market, we expect to see launch of new projects, expansion of existing business units, and a revival in commercial travel in the next two years. The government's focus on infrastructure development, coupled with the above trends, will help in reviving the hotel industry in the coming years. It should be noted that the country average is not representative of the trends seen in certain key hotel markets in India as it includes the results of lower star category hotels across several cities which, comparatively, have a more restrained operating environment. Table 2 illustrates average occupancy and rate for 32 cities/regions across the country over the last five years, which is followed by HVS' viewpoint on the demand-supply scenario and performance of the 19 identified hotel markets based on in-house research. TABLE 2: Occupancy and Room Rate: 32 Cities/Regions in India Occupancy Room Rate( ` ) City 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 64.1% 66.8% 69.3% 63.1% 61.3% 3,227 3,741 4,556 4,487 4,842 Agra 60.7% 58.9% 62.8% 54.8% 57.0% 2,389 2,361 3,307 4,211 2,482 Ahmedabad 68.9% 69.6% 74.9% 63.7% 65.7% 2,572 2,108 4,138 4,039 3,367 Aurangabad 43.2% 52.9% ID 56.5% 57.9% 1,837 2,160 ID 2,289 2,850 Bengaluru 71.7% 67.9% 73.1% 56.5% 52.6% 6,534 8,519 9,679 9,757 6,766 Bhopal 65.8% 74.7% 70.3% 72.2% 66.1% 1,604 2,028 2,647 2,639 3,110 Chandigarh 88.7% 88.7% 79.6% 79.6% 69.1% 1,103 1,103 4,057 3,716 4,780 Chennai 78.0% 78.7% 77.4% 64.6% 65.6% 3,080 3,340 3,076 4,678 4,083 Coimbatore 79.7% 72.9% 77.8% 72.1% 75.5% 2,311 2,322 2,634 3,255 3,236 Darjeeling 50.1% 56.3% 57.8% ID 47.2% 1,912 2,090 1,719 ID 3,193 Goa 66.7% 71.3% 70.1% 61.7% 63.1% 3,994 4,515 4,368 5,378 4,757 Hyderabad 80.2% 71.6% 63.7% 56.3% 58.8% 4,305 4,660 5,643 4,730 5,137 Indore 64.9% 69.8% 72.9% 68.7% 65.2% 773 992 1,486 1,933 1,814 Jaipur 60.2% 69.2% 63.0% 61.4% 57.7% 2,220 2,743 5,460 4,472 4,059 Jodhpur 45.1% 50.7% 53.6% 51.0% 43.2% 1,679 4,066 5,468 3,964 4,552 Kochi 65.9% 75.4% 75.2% 67.4% 64.4% 1,247 1,237 1,486 2,062 2,806 Kolkata 65.0% 75.6% 72.5% 69.6% 64.5% 2,668 3,567 5,138 5,342 4,880 Kullu-Manali 48.0% 46.9% 48.1% 50.9% ID 1,585 2,334 1,688 3,716 ID Lucknow 75.0% 70.8% 71.6% 63.0% 58.7% 2,060 1,988 2,208 2,491 5,109 Mount Abu 52.7% 56.6% 57.0% 69.4% 67.5% 1,338 1,558 1,825 1,823 2,159 Mumbai 75.8% 79.2% 80.1% 71.2% 67.2% 4,615 4,996 6,665 6,822 5,833 Mussoorie 55.0% 50.9% ID 48.0% 45.9% 656 1,454 ID 4,099 6,078 Mysore 60.9% 46.4% 66.3% 67.7% 67.7% 1,249 3,300 1,254 2,340 2,637 Nagpur 71.0% 69.4% ID ID 61.5% 1,307 1,144 ID ID 3,132 New Delhi - NCR 74.8% 82.2% 78.0% 64.8% 64.6% 6,699 7,459 9,728 6,087 6,985 Pune 77.3% 80.7% 76.5% 65.5% 53.2% 2,621 3,232 4,927 4,951 3,921 Raipur 74.1% 74.1% 52.7% 64.3% 39.0% 2,550 2,550 1,055 1,087 1,521 Shimla 45.2% 52.2% 64.6% 52.7% 48.0% 813 1,554 1,033 1,766 1,790 Thiruvananthapuram 57.6% 62.4% 65.1% 57.9% 55.3% 1,665 3,959 2,221 1,570 1,422 Ootacamund 50.3% 48.5% 58.3% 58.1% ID 1,690 1,527 1,258 1,956 ID Udaipur 55.3% 57.8% 58.2% 51.6% 47.0% 3,580 3,700 6,320 7,319 3,543 Vadodara 70.0% 71.9% ID 77.9% 65.6% 2,085 1,730 ID 2,779 4,360 Visakhapatnam 77.2% 71.4% 75.9% 69.0% 62.1% 1,686 2,495 3,169 3,687 2,809 Page 12
Seven Major Cities Bengaluru Bengaluru witnessed a sharp correction in average rates of approximately -31% in 2009-10 over the previous year, following the drop in occupancies in 2008-09 and 2009-10. The major portion of demand for Bengaluru is comprised of the commercial segment; therefore, it suffered both from the decrease in travel expenses by corporations and building of guest-houses by large companies to house their employees for an extended period of time. Bengaluru is currently divided into three micro-markets: the Central Business District (CBD), the Whitefield area and the Electronic City area. While the CBD comprises mostly first class/luxury hotels that cater to midmanagement or higher corporate clients, Electronic City and Whitefield largely consists of mid-market to budget hotels with the exception of a few first class hotels. The city is expected to further segregate into two more micro-markets: the Northern (Devanhalli) and Western (Yashwantpur) markets. Going forward, we anticipate a strong pickup in demand due to existing companies becoming more active and due to a number of companies moving into Bengaluru. However, there is an ample amount of new supply entering the market in the next three to four years and this is bound to put downward pressure on most hotels' performances. The new convention centre being developed near the international airport has recently run into some trouble and therefore will be delayed, leading to a decline in the anticipated MICE demand. Chennai Similar to most major cities, Chennai also witnessed significant rate corrections (-12.7%) in 2009-10, following the declining occupancies in 2008-09. However, the city-wide occupancy increased by approximately 2% over the last year, owing to improved performance in the last quarter of 2009-10. Although the hotels witnessed a decline in demand from the IT/ITeS industry concentrated on the OMR, the fast-developing industrial regions of Sriperumbudur, Ambattur, and Egmore helped in sustaining occupancies. The delay in hotel openings of large hotel projects also helped in maintaining stable occupancy levels. The diverse nature of demand in Chennai, comprising of IT/ITeS, automotive industry, as well as other manufacturing industries located in Sriperumbudur will sustain the growth in demand going forward. The expansion of existing manufacturing facilities and setting up of new plants is responsible for attracting extended-stay demand to the city, and is also responsible for travel by foreign corporate guests with high paying propensity. However, a significant increase in supply of branded hotels with sizeable inventories, especially in the upscale and luxury segments, will put downward pressure on occupancies and rates. Goa The growing attractiveness of Goa as a leisure destination helped the region in achieving a growth in occupancies of approximately 3% in 2009-10 over 2008-09. The Deluxe and categories of hotels witnessed occupancies over 70%. The increased interest in the destination by the domestic travellers helped sustain demand for the area; however, given the shift in demand from foreign to domestic tourists, and the effects of the economic slowdown on foreign feeder markets, the average rates declined by approximately -12%. Improved air connectivity with other Indian cities has further helped increase the traffic of tourists into the area. Given the difficulty in obtaining approvals and licenses, the state continues to have high barriers to entry for new hotel projects. This has prevented an influx of new hotel supply witnessed in several cities across the country. In the future, we expect the state to become an all-year-round destination from a seasonal Page 13
destination, given the increase in domestic tourists. Also, a significant increase in MICE travel is expected with the opening of the Grand Hyatt hotel and convention center. Kolkata Following last year's downward trend in occupancies and average rates, Kolkata witnessed a decline in occupancy and average rates of -7.4% and -8.7% respectively. However, the city saw the lowest decline in average rates across the seven major cities. This may be attributed to that fact that Kolkata is a relatively stable market with a small base of existing hotel rooms that has not witnessed significant fluctuations in hotel room rates in the past few years. Kolkata is expected to see significant commercial and subsequently economic development in the near future. Peripheral areas of the city such as Salt Lake, EM Bypass and Rajarhat are anticipated to be the key growth areas going forward. However, poor civic infrastructure, and a state administration that is generally viewed as lethargic, has limited the pace of development and growth in the city. Nevertheless, despite the slow pace of growth, the overall outlook for Kolkata remains positive owing to an increase in commercial activity in the city and new developing micro-markets such as Rajarhat and EM Bypass. Overall, Kolkata is a relatively stable market and is not expected to see significant growth in average rates or occupancies in the short to medium term. Mumbai While the terrorist attacks in Mumbai had only a short-term impact on the performance of the local hotel market, the impact of the economic downturn was more pronounced. rates, which had exhibited strong increases in recent years during periods of strong economic growth, saw significant declines as companies sharply cut back on business travel. Additional increases in supply and subsequent declines in marketwide occupancy levels further led to average rate declines as hotels sacrificed rates to attract ratesensitive demand and maximize occupancy levels. The city witnessed an occupancy decline of 5.7% coupled with a drop in average rate of 14.5% in 2009-10. The future outlook for Mumbai remains positive; being the financial hub of the country, it will continue to attract commercial demand from the services sector, comprising financial services, consulting, insurance, and banking companies. Companies in the city are increasingly looking towards North Mumbai to set up operations or expand their presence in the city due to its central location, proximity to the airport, improving infrastructure, proximity to the main residential areas of the city, and most importantly, more affordable commercial rents as compared to South Mumbai. The stress on improving infrastructure in the city, with the projects such as the Metro Rail Project and Mumbai's International Airport, will help make Mumbai a more attractive destination. New Delhi-National Capital Region (NCR) The NCR is the only major city to have experienced a growth in average rates. According to the survey, the city recorded a 14% growth in average rates. However, this is contrary to HVS findings of occupancy and average rate erosion in the year 2009-10. The difference in the survey findings can be attributed to the large amount of responses received from Noida and Gurgaon, which are areas that continued to grow and recovered faster than the main Delhi hotels. Over the years, Gurgaon and Noida within NCR have emerged as independent micro-markets. Gurgaon has historically witnessed high commercial demand, and we expect the trend to continue given the opening of several company branch offices in Gurgaon, and even movement of companies from Delhi due to availability of larger spaces at comparatively lower rents. Going forward, it is expected to witness growth in demand from the MICE segment. Page 14
In the current year (2010-11), the NCR is witnessing a strong recovery, with growth in demand coupled with improved infrastructure. The focus on infrastructure development, with the expansion of the Delhi Metro, construction of intra-city roads, as well as the development of the new International Terminal (T3), for the Common Wealth Games (CWG), have helped in making the city more attractive for both investors and travellers. However, the delay in several hotel projects which were to be launched for the CWG are expected to enter the market in the near future, therefore putting downward pressure on average rates. Pune As per our indications in the previous report, Pune suffered significant declines in occupancies and average rates, with occupancies declining by -18.8% and average rates falling by -20.8%. New supply which came in 2008-09 and 2009-10, coupled with sluggish increase in demand is responsible for the poor performance of the city. Pune has witnessed the development of micro-markets such as Hinjewadi, Chakan, Ranjangaon, and Talegaon. In the next two to three years we expect demand from the micro-markets in peripheral locations to outpace the estimated growth in the central business districts. Going forward, the city is still expected to see a large influx of supply in each micro-market, and we expect different growth rates for each micro-market. Overall, Pune is expected to recover to stable performance levels in the next three to four years. Twelve Other Cities Ahmedabad Ahmedabad, the largest city in Gujarat, is divided by Sabarmati River into two physically distinct eastern and western regions. The eastern bank of the river houses the old city, characterized by packed bazaars, clustered shanty buildings and numerous places of worship. The western bank of the river has developed into the new Ahmedabad. Educational institutions, planned residential areas, shopping malls, multiplexes, as well as the business districts of Ashram Road, CG Road and the newly developing S G Highway represent modern-day Ahmedabad. Although Ahmedabad is considered a business friendly destination with transparent government policies, some projects such as the Gujarat International Financial Tec-City (GIFT) and the Sabarmati Riverfront Development Project have encountered delays owing to the economic slowdown. The Ahmedabad hotel market witnessed a significant growth in new supply in 2009-10. Despite the tremendous growth in supply, HVS research reveals that the city witnessed only a -7% decline in overall occupancies. (The Indian Hotel Survey results show an increase of 3% in citywide occupancies; the large number of responses from unbranded hotels might be responsible for the difference in results). The strong demand growth in the market was able to support the new supply entering the market, and we expect this trend to continue in the near future. However, the new entrants in the market have undertaken aggressive pricing strategies, which lead to a decline in average rates of -16.6%. The city is expected to witness a sizeable amount of new supply in the near future; therefore, we expect the rates to be depressed in the short term. Coimbatore Coimbatore is known for its textile factories, engineering firms, specialized health care facilities, and educational institutions. Coimbatore and the neighbouring town of Tirupur are known globally as a centre for high-quality textile manufacturing units. Coimbatore is also a well-established centre for manufacture of auto components, wet grinders and electric pumps. In recent years, the government has been promoting the city as a hub for software development by encouraging the development of IT parks in and around the city. Coimbatore has a small base of hotel rooms, positioned mostly in the mid market and budget segments. A significant amount of new supply is proposed to enter the market in the next few years; this supply consists of two branded upscale and three mid market hotels of sizeable inventories. Although historically Coimbatore has been a stable market, the market dynamics is expected to change with the addition of branded supply. The Page 15
market occupancies and average rates are expected to see a marginal correction in the next two to three years but overall we anticipate steady growth for the city. Hyderabad Hyderabad has traditionally been a major centre for the IT and ITeS sectors. However, with the recent economic downturn, these sectors saw declines while new sectors such as finance and biotechnology have become more active in Hyderabad. Until the downturn, Hyderabad saw significant levels of economic development in the form of a new international airport, extensive improvements in road infrastructure, and announcements of new industrial parks and SEZs proposed for development across the city, especially in Gachibowli, HITEC City, and Shamshabad. Many of the proposed developments were put on hold due to the economic downturn, which impacted the hotel market in Hyderabad. The political standoff over the Telangana issue also had a negative impact on hotel demand in the city. While demand started recovering in Hyderabad since late 2009, the hotel market has also seen significant increases in supply, which has had a negative impact on marketwide occupancy and average rates. However, with a continued focus on economic development by planning authorities, the high level of optimism among companies based in the city, and assuming there is a timely resolution to the Telangana issue, Hyderabad's lodging market is expected to see improvements in the future. Indore Indore, the capital of Madhya Pradesh, has historically been known for textile production and domestic trade. The city is now becoming a key manufacturing centre for automobile units like Force Motors, Bajaj Tempo and Eicher Motors. Other demand generators in the city include Pharmaceutical and IT and ITeS units. The major industrial developments are concentrated in Pithampura and Dewas, located on the outskirts of the city. The hotel market consists of budget and mid market hotels, and has shown stable performance in the past five years. Going forward, we expect the addition of medium sized budget and mid market branded hotels. With the expansion and development of automobile units and the development of multi-use SEZs in the city, we expect stable performance in the next few years. Jaipur Jaipur, situated en-route the Golden triangle of Delhi, Agra, and Jaipur, has established itself as a leisure destination. The city has benefited from its location on the National Highway-8 which, apart from linking it to the abovementioned cities, also links to other regions of importance such as Udaipur, Surat and Vadodara. All these regions provide the city with significant room night demand that is consistent all throughout the year. Additionally, the city's close proximity to Delhi provides for weekend demand in the form of day use leisure travel apart from being host to several large and small conferences. Jaipur witnessed a decline in foreign tourists in 2009-10, given the effects of the economic slowdown. According to the survey, the city witnessed a decline in occupancy and average rates of -6.1% and -9.2% respectively. The shift in demand from foreign to domestic leisure travel was partly responsible for the decline in average rates. The city has witnessed a significant growth in supply in the upscale segment; and still has a pipeline of supply in the same category for the next few years. We expect the entrance of new hotel supply to exert downward pressure on occupancy and rates in the near future. Kochi Kochi is the commercial and financial center of Kerala and is an important center for spice trade. The state Page 16
government has recently developed a new International Container Transshipment facility and this is expected to see the city grow into an international sea port. Although the major portion of demand for hotel accommodation is comprised of the commercial segment, Kochi caters to large MICE and Individual Leisure demand. The Kochi International airport is also a gateway to other leisure destinations in Kerala, such as Munnar and Thekkady. The Kochi hotel market has witnessed a trend of declining occupancies in the past two years, even though the average rates have seen a marginal increase. The new supply entering the market coupled with the demandsupply imbalance is responsible for this trend. In the future, apart from leisure demand, we expect the meeting and conferences to contribute a significant share of demand for the market. However, the high cost of air transportation may provide competition from other cities which are better connected to important source markets for MICE demand. With the recent announcement of a Kochi Franchise in the cricket tournament, the Indian Premier League (IPL), the city can expect some additional room night demand. Madurai Madurai, the second-largest city in Tamil Nadu, is built around the historic Meenakshi Temple. The city attracts a significant amount of tourists who visit for religious reasons. It also serves as a gateway destination for travel to coastal cities of Rameshwaram and Kanyakumari. The central business district (CBD), located on the south banks of the Vaigai River, houses corporate offices of some textile manufacturing companies, automotive manufacturers and trading firms, which are located mostly in the Tallakulam and Pazahanganatham areas of the city. Several banks and government offices located near the Meenakshi Temple generate commercial demand for hotels in the city. The city continues to offer opportunities for new industrial development north of Vaigai River. Madurai has been a stable market with a small inventory of mid market and budget segments. With its consistent mix of Commercial and Leisure demand, we expect the Madurai hotel market to perform steadily in the long term, with proposed hotel supply putting no pressure on occupancy and rates in the short term. Mysore Mysore is a popular tourist destination, receiving over two million visitors annually. The Karnataka government is taking initiatives to promote heritage tourism in Mysore and the city aims to target five million visitors annually by 2020. Other factors that make Mysore a key tourist destination are a good geographical location in close proximity to Bangalore, and excellent climatic conditions. Well-planned investments in the city's infrastructure (such as roads and the airport) and industries (establishment of a number of corporations, SEZ activity), are expected to further catalyse Mysore's position from a purely tourism driven city to a commercial one. Currently, the hotel market consists largely of small, unbranded hotels in the budget and mid market segments. Going forward, we expect the addition of branded, medium sized mid market hotels. Though the Mysore market is weak at present, it is expected to grow in the near future. Several factors will help facilitate the growth in the market such as the Bangalore-Mysore Infrastructure Corridor, planned commercial developments, growth in tourism and improved operations of the airport. The commencement of the airport at Mandakalli is expected to stimulate the development of a peripheral area and we expect it to emerge as a major demand generator in the long run. Shimla Shimla is a popular destination for domestic leisure travel, and has historically witnessed strong demand from NCR, Punjab, Uttar Pradesh and Haryana. However, the increased spending propensity of travellers and the development of several competing leisure destinations have affected the prominence of Shimla as a domestic Page 17
leisure destination. The rates in the city remained relatively stable since it is sustained by domestic demand; however, the occupancies fell by -8.8% over the previous year. The neglect by the administration in preserving the flora and fauna in the area as well as over-development in the area is hampering the overall growth and sustainability of the destination. Thiruvananthapuram Unlike other cities in Kerala, leisure travel to Thiruvananthapuram city is limited and the demand for hotel accommodation is mostly from the commercial and government segment. Kovalam, located only 16 kilometers south of Thiruvananthapuram, has several quality hotels and resorts with private beach access and predominantly caters to leisure demand in the region. Thiruvananthapuram has witnessed a decline in occupancy and rates in the past two years, primarily due to the absence of new commercial developments. Lack of new demand generators or expansion of existing commercial facilities has led to minimal change in overall demand for the city hotels. Although the government is trying to encourage growth of the IT and ITeS sector with expansion of the Technopark campus, these developments have been slow in taking shape and are not helping in generating new demand for the city hotels. With no significant increase in demand and supply, the hotel market is the city expected to be stagnant over the next few years. Udaipur Udaipur is a well-known tourism destination, and receives a significant number of domestic and international tourists. It has historically been one of the best performing leisure destinations in the country with hotels attracting high average rates. Along with its surrounding areas, the city features many attractions namely its forts, palaces, architecture, heritage, and culture. The city's location on the NH-8, which connects the city to Delhi via Jaipur in the north of India and Mumbai via Ahmedabad in the west, acts as an advantage. Udaipur is a seasonal tourism destination, witnessing a peak season from September to March. The city, comprising primarily of heritage properties, has seen stable performance in the past five years, with steady increases in average rates. However, in 2009-10, owing to the decline in foreign tourists, the city witnessed a decline in both occupancies and average rates. The hotel market looks stable in the medium to long term. Vadodara Vadodara (formerly Baroda) is situated between Surat and Ahmedabad and is considered to be the gateway to the 'Golden Corridor' a chemical industrial zone that runs from Mehsana to Vapi. Vadodara has also benefitted from the development of the neighbouring district, Baruch, especially with Dahej (a port town in Baruch) being identified as the Petroleum, Chemical and Petrochemicals Investment Region. Historically, hotels in Vadodara depended on demand from public sector companies to a great extent, comprising middle or junior management level employees. More recently, the rising economic activity has led to more white-collared visitors to the city. Demand for hotel accommodation has seen a steady increase with the exception of 2008-09, where it dipped marginally due to the global economic slowdown. The average rates have also witnessed a steady increase over the recent years; this trend is expected to continue, provided the proposed supply enters the market in a phased manner with optimum inventory. Lack of quality hotel accommodation at convenient locations has discouraged senior employees from staying in the city for a longer duration. This phenomenon has also led to the development of corporate guesthouses and rented apartments. We expect the demand for hotel accommodation to further pick up in the future, especially in the commercial and extended stay segment, as the city continues to experience growth with several SEZs being sanctioned in the region. Page 18